Rayfield v Hands
A provision in the articles requiring the directors to buy the shares of a member who wished to sell was enforceable by the member against the directors personally.
Facts
The articles of a private company provided that a member who wished to transfer his shares should inform the directors, who would take the shares equally between them at a fair value. The directors were also required to be members. Mr Rayfield, a member, told the directors that he wanted to sell his shares, but they refused to buy them. He sued the directors.
Legal principle
Vaisey J held that the directors were bound to buy the shares. He said that the provision related to the relationship between Mr Rayfield as a member and the directors in their capacity as members, rather than as directors, because directors had to be members. The articles could therefore be enforced directly between members, without joining the company. He said that the company was a quasi partnership, which supported this view.
Related cases on the company's constitution and decision making
- Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656
- Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653
- Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988
- Brown v British Abrasive Wheel Co Ltd [1919] 1 Ch 290
- Bushell v Faith [1970] AC 1099
- Cane v Jones [1980] 1 WLR 1451
- Re Duomatic Ltd [1969] 2 Ch 365
- Eley v Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88
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